c. Suppose that public policy alters the saving rate sothat the economy reaches the Golden Rule level ofcapital. What will the marginal product of capital be atthe Golden Rule steady state (MPK*)?`goldMPK*goldd. What will the capital-output ratio be at the Golden( gald)?K *Rule steady stateKY golde. e. What must the saving rate be to reach the GoldenRule steady state (sgold)?%Sgold = Economic Growth II – Work It Out Question 2a. In the initial steady state, what is the savings rate (s)?In the nation of Wooknam, the capital share of GDP is 40percent, the average growth in output is 3.5 percent peryear, the depreciation rate is 4.0 percent per year, and theS =%capital-output ratio is 5.5. Suppose that the productionfunction is Cobb-Douglas and that Wooknam has been in asteady state.Round answers to two places after the decimal whennecessary.b. In the initial steady state, what is the marginal product ofсapital (MPK)?MPK =

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c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state (MPK 8old)? MPK* gold d. What will the capital-output ratio be at the Golden K * Rule steady state Y gold Y gold e. e. What must the saving rate be to reach the Golden Rule steady state (sgold)? % Sgold =

c. Suppose that public policy alters the saving rate so that the economy reaches the Golden Rule level of capital. What will the marginal product of capital be at the Golden Rule steady state (MPK 8old)? MPK* gold d. What will the capital-output ratio be at the Golden K * Rule steady state Y gold Y gold e. e. What must the saving rate be to reach the Golden Rule steady state (sgold)? % Sgold =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Policymakers trying to promote economic growth must confront the issue of what kinds of capital the economy needs most. If policymakers decide to rely on the marketplace to allocate the pool of saving to alternative types of investment, Those industries with the kinds of capital that yield the lowest marginal product will borrow the most. Those industries with the kinds of capital that yield the highest marginal product will borrow the least. All industries will have incentives to borrow more. Those industries with the kinds of capital that yield the highest marginal product will borrow the most.
Using the law of motion for physical capital accumulation (K), what is the amount of capital for the next period if the amount of physical capital today is 20 and Investment is 15 (Assume a depreciation rate of 10%) a) 23 b) 33 c) 34 d) 35 3- Using the law of motion for physical capital accumulation (K), what is the steady state level of capital when investment is 10? (Assume a depreciation rate of 10% and remember that physical capital is constant at the steady state) a) 100 b) 50 c) 120 d) 123 4- What is the key difference between catching up growth and cutting edge growth? a) Cutting edge growth is based on capital accumulation while catching up growth is based on technological advances b) Cutting edge growth is based exclusively on natural resources unique to every country c) Cutting edge growth is based on innovation, new ideas. Catching up growth is based on physical capital accumulation d) None of the above
31) Given the narrow interpretation of technology, technology will include which of the following? A) how well firms are run B) the organization and sophistication of markets C) the political environment D) none of the above 32) Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run A) the growth rate of output per capita will be greater in B than in A. B) the growth rate of output per capita will be greater in A than in B. C) the capital-labor ratios (K/N) will be the same in both countries. D) the growth rate of output per capita will be the same in both countries. 33) Suppose there are two countries that are identical with the following exception. The saving rate in country A is greater than the saving rate in country B. Given this information, we know that in the long run A) the capital-labor ratio…
The economy grows 3.59 percent per year over a 20 year period. 0.67 percent per year is attributed to labor and 1.49 percent per year is attributed to capital. Therefore, enter your response here percent per year must be due to technological progress. (Enter your response rounded to two decimal places.)
Question 2Assume production function is given by:Y= K(1/2) L(1/2)a. Write the production function in per worker terms (y=f(k))b. Assume that the per worker level of capital in the steady state is 4, the depreciation rate is 5% per year, and population growth is 5% per year. Does this economy have “too much” or “too little” capital? How do you know? [Show your work].
What happens in the steady state to the capital-labor ratio, output per worker, and consumption per worker when each of the following events occur? You should assume that the steady-state capital-labor ratio is below the Golden Rule level.
Suppose that production in an economy is represented by the production function Y = K1/4. If the investment rate is equal to 0.25 and the depreciation rate is equal to 0.10, calculate the steady-state levels of capital and output.
Ecuador's economy has a production function that is as follows: Y = K2/5L3/5 The men in Ecuador generally stay home performing household chores while women work. Since the Ecuadorian state television stopped airing soap operas, many men decided to join the workforce and thus the labor force increased by 6.5%. However, recent storms have destroyed much of the capital stock of the country and thus the capital stock shrank by 2.5%. A. Assuming there is no change in total factor productivity in Ecuador, how would the output of Ecuador's economy change? B. How would labor productivity (output per worker) be affected by the increase in labor and decrease in capital stock? Explain. C. Assuming instead that Ecuador's economy grew by 4.9%, what would be the change in total factor productivity in the economy?
Assume that a E (0, 1). Draw a diagram that describes the evolution of kt, and show that there exists a unique steady state, k* > 0. Label properly. Find the expressions for the steady state variables k*, y*, and c* in terms of the parameters of the model. , Now, assume that α = 1. Draw a diagram that describes the evolution of kt, and show that income per worker can grow indefinitely in this case. Label properly.